Camping Warehouse Australia Pty Ltd (formerly Mountain Buggy Australia Pty Ltd) v Downer EDI Ltd
[2015] VSC 122
•14 April 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2014 01423
BETWEEN
| CAMPING WAREHOUSE AUSTRALIA PTY LIMITED (FORMERLY MOUNTAIN BUGGY AUSTRALIA PTY LIMITED) | Plaintiff |
| and | |
| DOWNER EDI LIMITED (ACN 003 872 848) | Defendant |
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JUDGE: | SIFRIS J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 March 2015 | |
DATE OF JUDGMENT: | 14 April 2015 | |
CASE MAY BE CITED AS: | Camping Warehouse Australia Pty Ltd v Downer EDI Limited | |
MEDIUM NEUTRAL CITATION: | [2015] VSC 122 | First Revision: 24 April 2015 |
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PRACTICE AND PROCEDURE – Whether class closure order should be made before the close of pleadings – Effect of earlier funded class action compromised prior to the commencement of proceedings – Class closure premature – Supreme Court Act 1986 (Vic) ss 332F and 332G – Winterford v Pfizer Australia Pty Ltd [2012] FCA 1199 – Mathews & SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 13) [2013] VSC 17.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N O’Bryan SC with Mr M Symons | Mark Elliot |
| For the Defendant | Mr G L Meehan with | Colin Biggers and Paisley |
HIS HONOUR:
This is a group proceeding commenced by the Plaintiff on its own behalf and on behalf of all persons who acquired shares in the Defendant on or after 12 January 2010, who were at the commencement of trading on 1 June 2010 holders of any of those shares and who have claims for loss and damage caused by the conduct of the Defendant in the period 12 January 2010 to 31 May 2010 as alleged in the Further Amended Statement of Claim.
The conduct of the Defendant referred to, relates to alleged breaches of the Defendant’s continuous disclosure obligations under s 674 of the Corporations Act 2001 (Cth) and the alleged misleading or deceptive conduct of the Defendant. The precise allegations are not relevant for the purposes of this application.
By summons filed 30 May 2014 the Defendant seeks, amongst other things, the following relief:
(1)On the grounds set forth in the Schedule to this Summons, an order pursuant to Order 23.02 and/or s 33ZF of the Supreme Court Act 1986, that the Plaintiff’s Statement of Claim be struck out;
(2)An order pursuant to s 33N(1), alternatively s 33ZF, of the Supreme Court Act 1986, that the proceeding no longer continue as a group proceeding under Part 4A of the Supreme Court Act 1986.
(3)Alternatively to paragraph 2 hereof, an order pursuant to s 33ZF of the Supreme Court Act 1986 that the proceeding be permitted to continue as a Group proceeding under Part 4A of the Supreme Court Act 1986 only on the basis that group members ‘opt in’ and that directions be given for the closure of the class and a date be fixed by which time group members must join the group if they are to obtain any relief under s 33Z of the Supreme Court Act 1986.
The application pursuant to paragraph 1 was heard on 13 June 2014. On 1 August 2014 I published my reasons for declining to strike out the Statement of Claim.[1] The Plaintiff was given leave to file and serve an Amended Statement of Claim. Pursuant to further leave granted, the Plaintiff has filed a Further Amended Statement of Claim and the Defendant has recently filed a Defence.
[1][2014] VSC 357 (‘Judgment 1’).
Paragraph 2 of the Summons has not been pressed. This application concerns paragraph 3 of the Summons. The critical question is whether the class should be closed at this early stage.
I will assume familiarity with Judgment 1. As pointed out in Judgment 1[2] a number of members of the Defendant participated in an earlier funded proposed class action which was compromised before proceedings were commenced (‘The Members Settlement’). The Defendant informed the Court that the settlement was confidential including the names of the members bound by the settlement.
[2]Judgment 1 [26].
The nature and extent of The Members Settlement and consequent further exposure of the Defendant are critical matters to the resolution of this application.
Class closure
It is tolerably clear from a review of the relevant authorities that there must be some compelling reason or circumstance before the Court will require group members to go beyond their passive role and take the positive step of registering their interest with the Plaintiff’s solicitors at a time before pleadings have closed.
The Defendant contends that class closure is desirable and indeed essential at this early stage because knowledge of the quantum of potential group members’ claims, particularly in light of The Members Settlement is a necessary precondition to meaningful settlement discussions. Further, the nature and extent of the class, it was submitted, was necessary and in fact required under the Civil Procedure Act 2010 (Vic) which obliges parties to approach litigation in a more cost effective and practical matter and with proportionality in mind.
The Plaintiff contends that the Defendant is able to make a realistic assessment of the parameters of the claim (despite The Members Settlement) with sufficient precision for the purposes of settlement discussions, and that class closure is not required for this purpose. In any event the Plaintiff undertook to do this exercise (on a confidential basis and without knowledge of the names of the relevant members) if it obtained the relevant documents for which it served a Notice to Produce which has been objected to. Finally, the Plaintiff contends that it is far too early and against the philosophy behind the legislation, and authority, to close the class.
For reasons that follow, I agree with the Plaintiff.
In Winterford v Pfizer Australia Pty Ltd,[3] Bromberg J refused to make a class closure type order in two separate class action proceedings which were heard together. In the Winterford matter, settlement discussions had commenced and a sampling process had begun in relation to the assessment by the respondent of the claims by some group members. In the other matter heard together, pleadings had not yet closed and common questions had not been settled. Further, settlement discussions had not yet commenced. In these circumstances Bromberg J said —
[3][2012] FCA 1199 (‘Winterford’).
The class actions regime under Part IVA of the Act is designed to require little or no active involvement by group members: P Dawson Nominees Pty Ltd v Brookfield Multiplex Ltd (No 2) [2010] FCA 176 at [16] (Finkelstein J). Group members need take no positive step in the prosecution of the proceeding to judgment to gain whatever benefit its prosecution may bring: Mobil Oil Australia Pty Ltd v Victoria [2002] HCA 27; (2002) 211 CLR 1 at [40] (Gaudron, Gummow and Hayne JJ). Group members are group members principally for the limited purpose of taking the benefit, or suffering the burden, of the findings made by the Court on the findings of common questions: P Dawson Nominees at [16] (Finkelstein J).
In the context of such a scheme, there must be some compelling reason demonstrated before the Court will order group members to go beyond their essentially passive role: P Dawson Nominees at [17] (Finkelstein J).
A compelling reason which may make it appropriate to require group members to take a positive step in order to close the class of group members is the need to give finality to the proceeding. An example of such a case is McMullin (see in particular at 5) (Wilcox J).
In my view, the fact that a respondent says that it is not willing to enter into settlement negotiations because of uncertainty as to the quantum of potential group members’ claims, as is the case in the Collin matter, is not a compelling reason of the kind that would justify requiring a group member to take a positive step so as to enable the class to be closed. As Finkelstein J said in P Dawson Nominees at [31]:
First, it is a common, if not an inevitable, feature of class actions that the defendant will be faced with uncertainty regarding the quantum of potential group member claims. This is partly because of the essentially passive role of group members, already discussed.
Those observations were endorsed by J Forrest J in Thomas v Powercor Australia Ltd (No.1) [2010] VSC 489 at [38]:
I adopt, unhesitatingly, the first of the propositions advanced by Finkelstein J. That statement is underpinned by the very nature of the [class actions] model chosen by the legislature.
I appreciate that settlement of class actions without the quantification of group members’ claims presents difficulties. There are, however, a multitude of mechanisms available for structuring settlements. Many years of experience in both this country and in countries with other opt-out regimes, demonstrates that respondents are not only able to enter into negotiations without a quantification of group member claims, but can often successfully settle actions in those circumstances.
In the Collin matter, pleadings are not yet closed, common questions are yet to be settled, let alone determined, opt-out notices are about to be advertised and no settlement discussions have been undertaken. Nor are such discussions proposed in the absence of the Court making orders which effectively require group members to opt-in. In my view, for the Court to impose upon group members a positive requirement to opt-in, at this juncture, would turn on its head the very nature of the opt-out model chosen by the legislature.
The position in the Pfizer matter is somewhat different because settlement discussions have commenced and a sampling process has begun in which the respondent will assess the claims of some group members. It is expected that assessments of some 18 group members may be completed by about 1 February 2013. Whilst that circumstance represents a move down the track, it is not in my view a sufficiently compelling reason at this time to justify requiring a group member to take the positive step of opting-in on punishment of having that member’s claim for compensation potentially barred. It may well be that by February 2013 the parties in the Pfizer matter will be able to demonstrate a compelling reason for such an order because by that time it may be the case that closing the class will be a justifiable step in facilitating the bringing of the proceeding to finality.[4]
[4]Ibid [4]-[10].
In Winterford, Bromberg J was referred to a number of decisions of this Court where class closure type orders have been made. After referring to the cases[5] his Honour said —
All of those cases appear to have reached a far more advanced position towards finality than the position of either of the matters before me.[6]
[5]Ibid [11].
[6]Ibid [12].
In Mathews v SPI Electricity & SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 13)[7] J Forrest J considered that the ‘stringent test’ (compelling reason) imposed by Bromberg J was case specific and related to cases where the Court ‘.. was faced with a class closure application at a very early point in the proceedings’.[8] After referring to the express power in the Victorian legislation[9] to close a class (s 33ZG) and the terms of s 33ZF, namely, to do what is ‘appropriate or necessary’ his Honour made class closure orders for the purpose of progressing settlement discussions.
[7][2013] VSC 17.
[8]Ibid [36].
[9]Supreme Court Act 1986.
After a comprehensive review of the relevant authorities his Honour said —
If a class is to be closed, with such binding effect, the timing of such orders are important. There are many examples, a number of which I have referred to, of classes being closed subsequent to judgment or settlement so as to give finality to the proceeding. Equally so, as Winterford demonstrates, judges are reluctant to make class closure orders at an early point in the proceeding. This case falls between the two marks. As I discuss subsequently, the trial is imminent and the parties are now in a position to realistically assess prospects of victory and defeat. I return again to s 33ZG of the SCA – which demonstrates that a court may, if it thinks the time is right, require group members to take a step prior to resolution of the liability question (by either judicial determination or settlement) indeed, to the point where a failure to take that step may result in a group member being precluded from participation in settlement or the judgment fund.
Ultimately, it is a question of balance and judicial intuition. It requires a determination as to when in the course of a proceeding it is appropriate and in the interests of the group as a whole to require a step to be taken which may promote a prospective settlement as against simply letting the case proceed, perhaps interminably, without requiring group members to lift a finger – even if that course leads to disaster. [10]
[10]Ibid [75]-[76].
…
From the above discussion, I think it possible to distil a number of principles relevant to the questions of closed class proceedings and class closure under Part 4A of the SCA:
(a)It is open to a representative plaintiff to commence a proceeding under Part 4A of the SCA on behalf of a limited number of persons – a closed class – as opposed to a proceeding brought on behalf of all those who have suffered loss and damage as a result of the conduct of a defendant.
(b)It is within the Court’s power to permit a representative plaintiff to amend the group definition so as to, in effect, convert an open class to a closed class proceeding.
(c)If, in the course of a proceeding (as in this case) an order is to be made converting the nature of the class from open to closed it should only be made where the group members have adequate notice of the proposed change and a reasonable amount of time in which to determine whether to join the closed class.
(d)It is within the Court’s power to order class closure in the sense that a member of the class must take a positive step such as identifying himself or herself after receiving notice of class closure. It is also within the Court’s power to terminate the entitlement to compensation of any group member who does not come forward and indicate a willingness to participate in a distribution (putative or real) - pursuant to either a settlement or judgment. One of the fundamental bases for the class action provisions is achieving finality not only for the group members but also for the defendants to the proceeding.
(e)It may be appropriate, to make orders for class closure prior to a settlement or judgment. Such a course may be warranted, notwithstanding that there is no prospective settlement but on the material available it is considered to be in the interests of the class as a whole to require such a step to be taken. Relevant considerations include:
(i)the point at which the case has reached;
(ii)the attitude of the parties to such a step; and
(iii)the complexity and likely duration of the case.
(f)It is within the power of the Court to require an insurer who has indemnified a group member in respect of a loss which is the subject of the claim in the class action to take a step such as registration of that claim as part of the class closure process.[11]
[11]Ibid [79].
…
I have mentioned previously that registration of group members and insurer’s claims is important to give the defendants an idea of the total number of claimants and particularly those with non-insured or underinsured losses. It is understandable that settlement discussions have stalled without this information. This situation is just that to which s 33ZG of the SCA is directed: in this instance turning a passive group member into a slightly active one. Here the steps are not onerous. The registration form is simple and can be posted or uploaded.[12]
…
Accordingly, I am satisfied that, subject to appropriate notice being given to class members, it is appropriate for the purpose of progressing any settlement discussions to close the class as proposed by the parties. That is, requiring registration or to use the words of the statute, requiring the taking of a further “step” by group members.[13] I am also satisfied that imposing a condition on group members in relation to the binding nature of a settlement on non-registered group members is appropriate.[14]
[12]Ibid [91].
[13]Section 33ZG of the Supreme Court Act 1986.
[14]Ibid [94].
Although the steps required to achieve class closure - essentially registration - are not particularly onerous, I do not consider that orders of this kind should be made at this stage. It is too early. Pleadings have not closed and there is insufficient information about the nature and extent of The Members Settlement, the very matter that underpins the Defendant’s submission, that there are special circumstances to effect an early class closure. The mere existence of the proposed claim and its confidential compromise (matters within the Defendant’s knowledge) are not sufficient.
The gravamen of the Defendant’s argument is that it is unable to achieve the desired finality in litigation, by endeavouring to settle a second case (although The Members Settlement resolved prior to the commencement of any proceeding), without knowledge of the quantum involved. I do not accept the submission. Even assuming the sufficiency of the reason, I do not accept that the Defendant is unable to work out with sufficient accuracy, for the purpose of settlement, the range of quantum involved. Indeed as pointed out the Plaintiff has offered to help. This is a matter of some importance to both parties and they should endeavour to resolve the matter.
Further, although The Members Settlement is not an insignificant matter and it may call for appropriate orders closing the class at an earlier point than that which often occurs, such a point has not in my view been reached at this stage. There is still much to be done.[15]
[15]It is not without interest and relevance to note that the Defendant elected to enter into The Members Settlement without the benefit or protection of the binding mechanism created by the class action provisions of the Supreme Court Act 1986.
Finally, I do not consider that either the obligation of the parties under the Civil Procedure Act 2010 (Vic) or the fact that there has been much publicity or advertising of the group proceeding changes the position.
Notice to produce
The effect of the Notice to Produce served by the Plaintiff on the Defendant was to require the Defendant to produce at the hearing documentation to enable the Plaintiff to effectively work out the extent of the class and the extent of the Members Settlement.
Various objections were raised by the Defendant and by Slater & Gordon, the solicitors who acted for those members that were part of The Members Settlement and the documents were not produced. The main issue is confidentiality.
I do not propose at this stage to order production of the documents or to set aside the Notice to Produce. It will remain on foot until it is necessary (if this be the case) to deal with the issue.
Disposition
Accordingly, paragraph 3 of the Defendant’s Summons filed 30 May 2014 will be dismissed.
I will adjourn the matter for further directions on 24 April 2015.
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